Research Agenda

Consumer Directed Health Plans and Health Savings Accounts: A Panacea for Small Businesses?

Project Leaders: Kanika Kapur and Susan Gates

Access to affordable health insurance, while certainly an issue for all firms, is the number one concern of small businesses. One solution to rising health insurance costs is the development of consumer directed health plans (CDHPs). Increases in consumer cost sharing, especially deductibles, are part of this new strategy. Often, the increased deductible is combined with a tax-free personal health care spending account. New legislation has facilitated the formation of Health Reimbursement Accounts (HRAs) and Health Savings Accounts (HSAs) that are the newest form of personal savings accounts. These can be used by the employee to pay for unreimbursed qualified medical expenditures and permit the consumer to carryover unused funds in the account from year to year. HSAs are particularly well situated to help small firms without medical plans to offer them to their employees.

This study will examine the use of two key components of CDHPs in small businesses - the use of HSAs and the use of high deductible health plans. Our analysis will use data from a nationwide firm survey that has detailed information about the characteristics of firms and their health benefit offerings. We will examine the propensity to offer HSAs and high deductible plans in small businesses compared to large businesses and the characteristics of plans offered. Among firms that choose to offer HSAs and high deductible plans, we will profile the alternative health plan offerings and their relative costs. We will also examine the characteristics of firms that offer these plans and the characteristics of firms that are potentially interested in offering such plans. Our analysis will shed light on the question of whther CDHPs are indeed increasing access to health coverage in small businesses.